“SEC Direction Unlikely to Shift Despite Agency Transitions,” Law360

Elad Roisman has moved one step closer to being sworn in as a U.S. Securities and Exchange Commission member. On Aug. 23, 2018, the Senate Banking Committee approved Roisman as the Republican replacement for former SEC Commissioner Michael Piwowar, who stepped down in July after serving as commissioner since 2013, including a four-month stint in 2017 as acting SEC chairman. Roisman is currently chief counsel to the Senate Banking Committee led by Chairman Mike Crapo; he previously served as counsel for former SEC commissioner Daniel Gallagher, and at one time worked in the legal department at NYSE Euronext and as a corporate and securities attorney with Milbank Tweed Hadley & McCloy LLP. Also stepping down this year is Democrat SEC Commissioner Kara Stein. Stein’s potential replacement likely will be Allison Lee, a Democrat, whose name has been submitted to the president, and who previously served as an aide to Stein and is a former SEC enforcement attorney. Despite these forthcoming changes at the SEC, the balance of power and direction of the SEC is unlikely to change, as the SEC remains in Republican hands which, since Donald Trump took office, has translated to the SEC bringing fewer enforcement actions.

The president, subject to Senate approval, appoints all five commissioners: two Democrats, two Republicans and the chair, who may be of the president’s own party. Since the chair is both the SEC’s chief executive and the tie-breaking vote, the party that controls the White House also controls the SEC’s agenda and direction. While Chairman Jay Clayton is an independent, as a longtime partner at Sullivan & Cromwell LLP specializing in advising clients on public and private mergers and acquisitions and capital-raising efforts, his ideology is viewed as aligning squarely with that of the Republicans. The commissioners’ terms last five years and are staggered, with one commissioner’s term ending each June 5, although, as with Stein whose term ended June 2017, commissioners may continue to serve an additional 18 months if they are not replaced before then or resign sooner.

Until Piwowar’s seat is filled, the commission is temporarily deadlocked, with Clayton and Republican Commissioner Hester Peirce on one end of the political spectrum, and two Democrat commissioners, Robert Jackson Jr. and Stein, on the other. Once Roisman is confirmed, the balance will tilt toward the Republicans; indeed, it is expected that Roisman will become an ally of Clayton on many issues. The vote on Roisman’s confirmation before the full Senate has not been scheduled, and many believe the Senate is waiting for a Democratic nominee to replace Stein to tee up both nominees for Senate confirmation at the same time, as was done with Peirce and Jackson in 2017. However, there are no guarantees that the Senate will abide by this tradition, particularly given the current political climate.